Why your childcare business needs to pay higher rent in 2024
As we navigate the evolving landscape of childcare services, it’s crucial to understand why operating costs, particularly rent, have increased significantly over the past decade. Here’s an in-depth exploration of the factors driving these changes and the reasons behind the increase in your rent.
1. Rising Construction Costs
In the past ten years, the cost of construction has surged. In 2014, the average construction cost was approximately $2,500 per square metre. Fast forward to 2024, and that figure has risen to approximately $4,500 per square metre, marking an 80% increase. This substantial rise is attributed to the increasing prices of raw materials, labor, and the implementation of advanced building technologies.
2. Escalating Land Prices
Land prices have also seen a dramatic increase. For instance, property prices in several growth areas of Melbourne, Brisbane and Sydney are expected to double in less than a decade. This trend reflects a broader pattern seen across many regions, where the demand for land is outpacing supply, driving prices up.
3. Enhanced Commercialisation of Childcare
Childcare today is not just about minding children; it’s about providing a holistic early education experience. Modern childcare centres are now seen as foundational educational institutions. This shift has led to the development of more aesthetically pleasing and functionally superior facilities, which naturally come with higher costs. Parents today expect high-quality environments for their children, complete with modern amenities and innovative learning spaces.
4. Perception and Value
The perception of childcare has evolved. It’s now regarded as an essential service that plays a critical role in early childhood development. This elevated status means that investing in prime locations and state-of-the-art facilities is not just a luxury but a necessity. Higher rents often correspond to better locations, which in turn attract more families and enhance your business’s reputation.
5. High Interest Rates
High interest rates have also contributed to the increased rental costs with the Australian interest rate sitting at 2.5% in 2014, compared to now – where it sits at 4.35%. The past decade has seen fluctuations in interest rates, impacting mortgage and loan repayments for childcare facilities.
6. Dramatic Increase in Daily Fees
Daily fees for childcare have increased dramatically over the past ten years. In December, 2014 the average daily fee for childcare services was approximately $86.35 per day, compared to December, 2023 – the daily fee was approximately $157.90. This states a very prevalent increase in daily fees – which have continued to rise. This increase reflects the rising costs of providing high-quality care and education, including staff wages, utilities, and supplies.
7. Increased Government Subsidy
Over the past decade, there has been an increase in government subsidies for childcare. While this support helps families afford childcare, it also highlights the growing recognition of the importance of early childhood education. This increased subsidy often correlates with higher standards and expectations, which in turn drive up the costs of providing such services.
Understanding these factors helps in appreciating why higher rent is necessary in today’s childcare market. While the costs have undoubtedly increased, so has the value and quality of the services provided. By embracing these changes, your childcare business can continue to thrive, offering exceptional care and education to the children and families you serve.
Optimise your operational practices. With high rents becoming the norm, it’s crucial to make the most of your space. Leverage our services to ensure you’re maximising the value of every square foot you rent! Enquire now.